A firm has EBIT of Rs.50,000. Market value of debt is Rs.80,000 and overall capitalization rate is 20%.…
Under the net operating income approach, total firm value is \(50,000/0.20\) \(=\text{Rs.}250,000\). Equity value is firm value less debt, so it is Rs.250,000 − Rs.80,000 =…
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A firm has EBIT of Rs.50,000. Market value of debt is Rs.80,000 and overall capitalization rate is 20%. Market value of equity under NOI approach is:
Answer and explanation
Correct answer B
Under the net operating income approach, total firm value is . Equity value is firm value less debt, so it is Rs.250,000 − Rs.80,000 = Rs.170,000.
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Kerala SET (LBS Centre)